Analys från DailyFX
DAX Bearish Outlook Set to Revive Soon
What’s inside:
- DAX presses resistance, but continuing to fail
- Overall price action off the June high suggests more weakness to come
- French election gap-fill, sub-12k initial down-side objective
What will drive European equities during the 3rd quarter? See our Quarterly Forecast here.
In last week’s post, it was noted that the DAX was trading at a solid level of resistance which offered a quality spot to enter for those looking to establish a short position. The turn lower on Thursday was encouraging for the shorts as the French election-gap quickly came into view. But since touching off near the 6/30 low, the past couple of days the German index has pressed back up against the resistance zone in the vicinity of 12486/537 (the early-morning high was 12539, close enough).
As long as resistance holds in place, so does a bearish bias. Overall, price action isn’t acting very well since dumping off the record high last month. Strong down-moves followed by an inability to retrace are typically viewed as a consolidation period prior to seeing another leg lower. Then there is that glaring election-gap, too, which looks likely to be filled sooner rather than later. The CAC 40 has been trading in its gap, and also looks poised to fill soon once its own period of consolidation is over.
It’s still very early, but if today’s high holds and the DAX holds onto a reversal-day then we may have seen the high of the consolidation phase. In this case, a push back to the low-end of the recent range and worse becomes the likely scenario. A drop below 12320 brings the gap at 12289 quickly into play. Once in the gap, it’s game-on for the gap-fill. As we said the other day, it could happen all at once or take its time as the French index is. Either way, once in, look for it to fill down to 12048 at the least. The price swing-low we’re looking to as support clocks in at 11941.
Changing this view will require a strong push above the beforementioned resistance zone. Even then it won’t put a totally bullish undertone in place, but will sap some of the bearishness out of the current set-up.
DAX: Daily
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—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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